Dollar heads lower a day after Trump rips Fed and calls China and EU currency manipulators

Key Points
  • The U.S. dollar was lower in Tuesday morning trade, a day after President Donald Trump criticized the Federal Reserve and its monetary policy moves.
  • Trump repeated that he is "not thrilled" that the central bank continues to raise rates.
  • The comments trying to influence dollar policy were unwelcome by some, with investor Dennis Gartman saying the market should "object."
Trump can ask the Treasury Department, not the Fed, for a weaker dollar: Expert

President Donald Trump is getting his wish, at least for a day: The U.S. dollar is losing ground Tuesday a day after he said he's disappointed with the Federal Reserve's intention to keep hiking interest rates.

Since he's been in office, Trump has expressed his preference for a weaker currency, believing it makes U.S. exports more attractive on a global stage while he's trying to lower the national trade deficit.

In remarks Monday to Reuters, Trump again criticized the Fed and said he was hoping that Chairman Jerome Powell would have leaned more toward cheaper money. He took his position a step further by saying other nations are manipulating their currencies, a sign that the administration may get more aggressive with those trying to undercut the dollar.

"Investors have received further encouragement to continue taking profit from Dollar positions after President Trump once again repeated his view that both China and the European Union manipulate their currencies," Jameel Ahmad, global head of currency strategy and market research at FXTM, said in a note. "These comments mirror similar remarks made only a few weeks back, and have served as a reminder for traders that the Trump Administration does not want to see exactly what is occurring in the financial markets — i.e. a strong Dollar."

The greenback was off about 0.4 percent against a basket of its global competitors in morning trade, though it has gained 3.7 percent year to date.

In an interview with Reuters, Trump told the wire service that he was "not thrilled" with the Fed's approach to monetary policy, adding that he "should be given some help by the Fed" in his efforts to grow the U.S. economy.

Though it is not unprecedented, it is unusual for a president to try to influence the Fed, which is supposed to be independent of political influence. The Reuters interview was Trump's second effort this summer to nudge Powell and his fellow central bankers, the first coming in a July interview with CNBC when he also used the expression "not thrilled" to describe his opinion of Fed actions.

Since Trump was elected, the central bank has hiked its benchmark interest rate target five times and is expected to approve two more quarter-point increases before year's end.

"Reserve Bank independence is and has been one of the very hallmarks of the modern age of capitalism. It is a bulwark of immense importance," investor Dennis Gartman wrote Tuesday morning in his Gartman Letter market analysis. "We expect the Fed ... to remain wholly and completely independent. When they are not … when the political authorities interject themselves into monetary policy … [it is] right for the markets to object. We object."

Trump told CNBC that he understands that commenting about the Fed might upset some, but he does not care. He has said he respects the Fed's independence but is worried that the rate increases will disrupt the economic momentum.

Gartman attributed Trump's feelings about the Fed and preference for low interest rates to his past as a real estate developer.

"He cannot help himself; his background demands that he expresses dissatisfaction with high and rising rates," Gartman wrote. "His 'Base' may… and almost certainly will… applaud his comments; we shall not."

Ahmad, the FXTM analyst, added that the Trump comments will "ensure that sentiment remains driven by political risk" and he expects the market to be watching the China-U.S. trade talks this week to attract extra scrutiny.